Income Tax Reciprocity Battle Resurfaces with New Proposal

St. Paul, MN (NNCNOW.com) - Wisconsin officials say they're open to hearing Minnesota out on a new proposal that would revive income tax reciprocity between the two states.

A new study released this week shows restoring tax reciprocity would allow nearly 80,000 taxpayers in the neighboring states the convenience of filing income tax forms only in their state of residence.

Minnesota Governor Tim Pawlenty axed the agreement in 2010 in an effort to trim the state's budget.

Since then, State Senator Roger Reinert (DFL-Duluth) has been leading an effort to restore reciprocity, but Wisconsin officials have been hesitant to get back on board.

Wisconsin Department of Revenue Secretary Rick Chandler says the new agreement is a step in the right direction, with one sticking point.

Minnesota is asking Wisconsin to make an additional $6 million payment to reverse a tax increase imposed on some Minnesotan taxpayers when the old agreement was cancelled.

"It's unreasonable to ask Wisconsin to do that, we would hope their legislation would take a different position than their Dept. of Revenue has taken," Secretary Chandler said. "We would hope they look at it from the point of taxpayers and say no Minnesota taxpayer should pay more in taxes just because they happen to work in Wisconsin."

"My hope is Secretary Chandler in Wisconsin will accept the offer and we will have reciprocity back for tax year 2014," Sen. Reinert said. "If not then I think we as cross border legislators in Minnesota and Wisconsin will have to revisit the topic."

According to the benchmark study released this week, 70 percent of taxpayers live in Wisconsin and work in Minnesota.

To make up for lost revenue, the agreement would compensate Minnesota.

Minnesota currently has reciprocity agreements in place with both North Dakota and Michigan, but doesn't require compensation.

The Minnesota Department of Revenue Commissioner says that's because there are so few people involved and the tax rates are almost the same.